Pakistan International Airlines has fallen into serious trouble again as it struggles with huge cost increases and a ban on most of its aircraft.

European regulators in early March introduced a partial ban on the state-owned carrier's operations, allowing it to only serve points in the European Union with its new Boeing 777s. The partial ban came as a result of safety concerns and threw the airline's operations into disarray, as it served many points in Europe with ageing 747-200/300s and Airbus A310-300s.

PIA, which says the EU action represented "unfair, unjust and discriminatory treatment", is actively searching for aircraft to wet-lease to allow it to reinstate suspended services. This will only serve to increase the carrier's costs, however, which have been rising rapidly over the past two years as it has struggled to cope with increased fuel prices and payments related to its purchase of new 777s.

PIA says revenues increased 10% in 2006 while passenger traffic increased 12% and cargo traffic 17%. But these were "more than offset by a record increase in fuel price, and over 71% increase in financial costs to finance increased fuel and fleet replacement costs," according to former chairman Tariq Kirmani, who resigned suddenly in late March.

PIA claims that excluding fuel price hikes the airline would have turned a Rp4.8 billion ($79 million) profit in the last two years as a result of successful restructuring initiatives. PIA says it is now looking at expanding partnerships with other airlines in a bid to "improve the economics of PIA's operation". New codeshare deals have already been forged with China Southern Airlines and Thai Airways International.

Source: Airline Business